As 2022 comes to a close, it’s time to tie up the final loose ends so 2023 starts off on the right foot, with as much success (and as little stress) as possible. There are only a few days left in the year, so why not take a moment to make sure you start 2023 with financial peace of mind? Close your books with confidence before you break out the bubbly and celebrate what promises to be another exciting year in real estate. Below are our top 7 real estate accounting tips to ensure you’re ready to ring in the new year.
1. Update your accounting software
It’s important to close out your year with the most up-to-date software. Why? This helps you make sure your platform is accounting for all the latest regulatory changes for the year. If you have to update your software manually, you may be using an outdated version that will cause extra work for you later. If you use a QuickBooks® integration, make sure you’ve upgraded your application to the latest release. This will ensure that you have access to the latest tax forms, especially 1099s. If you have Automatic Updates turned on, you’re all set. If not, follow the QuickBooks® instructions for updating to the latest version here.
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2. Double-check your reconciliations
Life is about balance, and so is accounting! Reconciling your accounts is important so you can track your cash flow and make sure everything balances. Reconciliations are typically a monthly task, but it’s easy to fall behind, especially when you’re focused on other year-end tasks, like fun holiday parties. Check your reconciliations in your accounting software now and if you find any discrepancies, download your statements to find the culprit transactions. It’s not fun playing catch up the last week of December, but it’s worth it to come into work on January 3rd and hit the ground running!
3. Verify your tax payments
Did your brokerage accidentally miscalculate your tax obligations for the year? If it did, you have until mid-January to recalculate and pay what you owe to avoid any penalties. On the other hand, you might have overpaid your taxes, too. Once you get back from the holidays, ask your accountant how you can optimize your payments in 2023 so you aren’t paying too much or too little tax. Tax policies change all the time, and your accountant will have the most up-to-date information to make sure you’re doing everything to the letter.
4. Prepare your brokerage financial statements
Make sure you have a complete and updated balance sheet, which lists all your assets, liabilities, equity, and trial balance and provides an overview of all your general ledger accounts and their balances. Are there any discrepancies or glaring errors? Make sure you review and correct them before year end, since December 31 is the closing date for many important financial statements and other reports for your brokerage.
5. Review employee settings
Did you hire any new employees this year? Make sure they are set up properly in your system and have submitted all their important reporting documents, so that when it comes time to report their income (using W-2s in the US or T4s in Canada), you don’t have to chase down missing files. You can, of course, update and correct these forms later, but why not make sure you have everything you need do it right the first time?
6. Review your brokerage vendor, agent, and independent contractor settings
Double check to make sure your vendors, agents, and any other independent contractors are set up correctly so that everyone who needs one receives a correct 1099 (in the US) or T4A (in Canada) when tax season starts next year. You don’t want to find out there was an issue after the filing deadline, which falls at the end of January in the US and the end of February in Canada.
7. Plan for 2023
Year end is the perfect time to sit down and look at how you did. Did you grow this year? Did you improve your profitability? How are your margins? The end of each fiscal year is an opportunity to assess your past goals and whether you met them, take stock of your other achievements, look for improvements, and set new goals for the coming year. By writing down your goals and making them official, you’re also more likely to meet them (as many psychologists agree).
The end of the year is the perfect time to set yourself up for success for the coming year. Make your final preparations now so you don’t have to dread logging in on New Year’s Day.
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